Table of Contents
Mobile App Marketing : 8 Best Monetization Strategies
There are many ways to monetize your Mobile App.
To decide what fits you best, a thorough analysis of the competition is key.
First because you can identify what Monetization strategies they use, what they already have tested and what did not work.
Finally, before moving forward, make sure you run some simulations/cost analysis to ensure you will be able to generate some significant profit
Now let’s review my 8 Best Mobile App Monetization Strategies
1.Freemium Strategy
What is the Freemium Strategy?
Freemium mobile apps are free to download and users can access the app’s basic functionality. Some additional features can be unlocked by making a purchase.
It is widely popular. In fact, as of June 2020, over 96% of Apps follow this format (https://www.statista.com/statistics/266211/distribution-of-free-and-paid-android-apps/)
When to use it
Since everybody likes free stuff, this strategy will allow you to build a large user base quickly through advocacy and is based on the Foot in the Door concept we already covered for success.
Once the user are regulars, the potential frictions of using the app are reduced, the trust has been established and it is easier to sell premium features or upsell.
Pros
This offers multiple monetization options like display Ads for Free users, Premium features and Upsell opportunities.
Free Apps are also more likely to receive positive reviews which is great for App Store Optimization (ASO).
Cons
It could be challenging to know what features should be given for free and which ones to sell. A thorough analysis of your potential audiences is key.
No upfront revenue. This is longer exercise that first starts by acquiring users to then have an opportunity to generate revenue.
Finally, free apps tend to have lower user loyalty which makes your activation and retention efforts harder.
Example : Evernote
Evernote is a great example of Freemium.
It is particularly interesting to see how they evolved their offer over the years to move from a Feature based approach in 2017 to a more User-focused Benefit approach in 2020.
2.Paid Apps Strategy
What is the Paid/Premium App Strategy?
The Paid App Strategy consists in charging the user to download and use the App
When to use it
Paid Apps work well when you already have a strong brand awareness, a solid followers base and an App with a strong competitive advantage.
Aiming for 5 star rating is key here as a proof to your apps superior value.
Pros
Upfront revenue.
Paid Apps usually have a higher perceived value and users are generally more loyal to Apps they pay for.
Higher user experience due to the absence of advertising
Cons
Only 20% of paid apps are downloaded more than 100 times, so consider this when you build your business model.
Even with lots of great reviews, people are less likely to purchase an App if they can’t try it out first. So, consider a timed free trial.
The LTV of your customers tend to be lower than the Freemium monetization model.
The Apple Store takes a significant margin on Paid Apps
Example : WolframAlpha
This app is like a math and science version of Wikipedia.
It’s an outstanding source of knowledge and computation about virtually anything, from basic algebra to the depths of the universe.
It’s like a search engine for algebra, physics, engineering, and so much more.
3.In-App Purchases Strategy
What is the In-App Purchases Strategy?
In-app purchases strategy refers to the offering of goods and services from inside the application.
In-app purchases allow developers to provide their applications for free and then advertise upgrades to the paid version or paid feature unlocks to turn a profit.
They can also advertise other apps and services to anyone who downloads the free version.
Despite that only 5% of app users spend money with in-app purchases, the total amount earned by companies from this method is 20 times greater than the sum provided by all the other methods together.
When to use it
This is ideal when the purchase in in-tune with and enhances the customer experience by adding value to their journey.
Pros
This strategy can be highly profitable when used properly.
Attracts large audience through Freemium to sell to later.
Cons
The app stores like Google Play and Apple store take a significant margin on the sales (30% as of July 2020)
Because in-app purchases are conducted through a mobile device, unauthorized purchases can result in security issues.
Example : Wordscapes
This in-app purchase help you play longer by giving you more credits at a discounted price.
Note also, that it is a limited time offer.
4.In-App Advertising Strategy
What is the In-App Advertising Strategy?
The goal of this strategy is to attract a large enough user base to attract advertisers to place Ads on the App and generate revenue.
Aps can take various format : Interstitial, Pop up or banner ads (left to right)
Source : Instapage.com
When to use it
It is usually used when in-app purchases would simply not fit within your App.
Pros
Collects a lot of valuable demographic and behavioral data.
Allows to offer your App for free and therefore get more users right away
Cons
To be effective, In-app ads need to be highly targeted and present the right offers to the right users.
Pop-up banners are often considered intrusive and pushy. Prefer Ads that are integrated within your content and complement it.
Apps containing Interstitial ads are considered by Google intrusive and therefore do not rank as high as the same app without these Ads.
Example : Lucky Charms filter on Snapchat
For St. Patrick’s Day, Lucky Charms decided to partner with Snapchat and design an interactive, gamified filter, to promote their new magical unicorns’ cereal.
Image source : click here
5.Partnership Strategy
What is the Partnership Strategy?
Sometimes, App owners whose user bases match, collaborate to offer each other rewards. This sponsorship version is, in this case, called partnership.
When to use it
When the APP naturally complement each other and offer an extended value to both audiences
Pros
It is an opportunity to quickly expand your reach and offer additional services you did not before.
Cons
If the partnership is not a good match, it can annoy your user base
Example : Nike and Headspace
Headspace a meditation App, expanded its content towards sports meditation that could benefit high-performance athletes.
For Nike, it is an opportunity for their users to enjoy their workout more as they get advice from Headspace to improve their running experience.
For Headspace an expansion towards the sport audience.
It’s mutually beneficial
6.Sponsorship Strategy
What is the Sponsorship Strategy?
Sponsorship entails collaborating with advertisers who will provide rewards to your users when they complete certain in-app actions.
It could also be the use of the App skin or characters using the sponsor colors and logos for a limited and agreed period of time.
Since Apps use splash screens (loading screens when you start your App), this can also be branded in the name of the sponsor.
When to use it
When your App has a large audience and you have identified some commonality with the sponsor audience that make the combination a good fit
Pros
Expand your reach to an audience that shares similar point of interest with yours hence increasing the chance to gather more users.
Cons
This strategy is only possible if your user base is either big enough or specific enough to attract brands to pay for greater exposure to your audience.
Example : DIY Tip Genius
Here’s a version of using the splash screen to sell space to sponsors
7.Subscription Strategy
What is the Subscription Strategy?
This strategy is based on providing a service and charging a subscription usually on a monthly or yearly basis.
A good strategy is to offer several subscription tiers with a mix of features and pricing.
This allows easier subscriptions through the lowest tier and potential upselling over time.
When to use it
This format is ideal for a service based App that encourages frequent use.
Pros
Easy to attract users since the App is Free to start with to convert to paid later on.
Cons
It can be challenging to identify how to separate the content between the various tiers.
A subscription model requires focusing both on converting users into subscribers and on keeping current subscribers from churning.
Example : Spotify
Spotify is a best in class example of successful subscription model.
As a freemium, Spotify manages to convert over 40% of its free users to premium vs 2.5% on average for other subscriptions model Apps.
The success lays in constant experimentation, A/B testing, and analysis of user data feeding into their product development, marketing, and app monetization strategies.
8.Commission Strategy
What is the Commission Strategy?
This is when your App charges a commission when it hosts a transaction.
Usually either a nominal fee or commission % on the sale
When to use it
When your App is geared towards sales and has the ability to centralize all sources of interest in one place for the user.
Pros
You do not have to own a product or service to sell it since you sell other companies’ goods.
Cons
You need to have a significant base to convince other brands to partner with you rather than going direct.
Example : Fandango
This app helps you find a movie near you, make online reservation for your ticket, get your e-ticket and takes a commission each time a ticket is sold.
Key metrics for the Monetization phase
Free to Paid Conversion Percentage.
This is the number of regular users that turn into paying users.
Purchasing Time Frame
If your app is frequently used, consider offering premium features or special offers.
By analyzing the average purchase time, it enables you to find out when users are most interested in paying for additional features.
Related Articles
Table of Contents
Related Articles
Do you want more online revenue?
Just enter your email below to subscribe to my newsletter and GROW YOUR REVENUE
About Gilles Argivier
He is an International marketing expert and visionary entrepreneur.
For over 20 years, he has been entrusted by world class organizations as a driver of top and bottom line growth through transformational business development, brand’s sustainable strategy, product innovation and powerful online customer centric experiences
He owns and operates his marketing consultancy firm out of the US.
Toolbox
Main Articles
Do you want more online revenue?
Just enter your email below to subscribe to my newsletter and GROW YOUR REVENUE